FBI Presence Shadows Legislature's New Session
Sacramento's climate is clouded by inquiries tied to the secretary of state and Senate leader.
SACRAMENTO â€" For the first time since the
Capitol's "Shrimpgate" scandal more than a decade ago,
California legislators open their session today knowing
that the FBI is hovering not far away.
By issuing subpoenas, conducting searches and convening
grand juries in Oakland and Sacramento, the feds have made
their presence unmistakable as they investigate dealings by
the new state Senate leader, Don Perata, and Secretary of
State Kevin Shelley, a former legislator. Both men are
The scope of the inquiries, which are not connected, is not
known. But interviews and documents that have become public
suggest that the FBI is examining Perata's business and
political activity in Oakland, his hometown, and Shelley's
procurement of state money for a nonprofit group when he
was an assemblyman from San Francisco.
Shelley's troubles revolve around a politician's stock in
trade: delivering "pork barrel" spending to his district
and collecting campaign donations from political
supporters. And an aspect of the Perata inquiry involves
something that hits home hard: family. Like many elected
officials, Perata has family members â€" his
son and daughter â€" who work on his
Perata, confirmed last month by his fellow senators to be
their leader, holds one of the most powerful posts in
California government. Under the pressure of a criminal
investigation, he will still be expected to help shape the
state budget, exercise life-or-death power over legislation
and raise campaign money for fellow Democrats.
Shelley, who is responsible for ensuring that California
elections are fair and who had been a rising star, is so
wounded that his political survival is in doubt, several
For Democrats, who control both houses of the Legislature,
the investigations are an unwanted intrusion at a
particularly bad time. Legislators face weighty issues as
they return to work today, chief among them how to close
the estimated $8.1-billion budget gap.
Adding to the pressure, Gov. Arnold Schwarzenegger is
expected to propose a major overhaul of state government,
calling for a special legislative session to focus on a
state spending cap and legislative redistricting. If he
fails to win legislative approval, Schwarzenegger may
invoke his power to call a special statewide election to
deal with the issues.
Although no charges have been filed, the investigations are
"a cloud that hangs over everything," said Republican
campaign consultant Wayne C. Johnson.
Assemblyman Mark Leno (D-San Francisco) cautioned that it's
too early to know what the investigations might yield. But
the situation gives people in politics pause.
"Careers are made and broken on hints and whispers," Leno
said. "We live with it daily. One needs to be ever
vigilant, alert and knowledgeable."
If the inquiries continue to attract public attention,
Shelley and Perata "could become poster boys" for the need
for an overhaul of state government, Johnson said.
Johnson managed the campaign for the 1990 ballot initiative
that put term limits on state legislators and high
officials. Voters approved that initiative two years after
the FBI raided Capitol offices in a sting operation aimed
at state legislators.
Agents posing as out-of-state businessmen spread money
around Sacramento to win passage of phony legislation to
create a fictional shrimp processing plant. By the time
"Shrimpgate" was over, 14 Democratic and Republican
legislators, lobbyists and others had been convicted and
sent to prison.
It was last summer that Shelley's difficulties began, after
the San Francisco Chronicle reported that as an assemblyman
in 2000, he secured $492,500 in state tax money for a
political supporter's group. The funds were to pay for
construction of a community center â€" but no
such center was built.
Authorities believe that Julie Lee, the head of the group,
and her associates helped divert at least $125,000 to
Shelley's campaign for secretary of state. Shelley, who
like Lee has denied wrongdoing, returned $125,000 to the
state and put an additional $80,000 in an escrow account
pending the outcome of the investigation.
Meanwhile, a highly critical Bureau of State Audits report
issued last month said Shelley used millions in federal
money intended for voter education for apparently political
purposes, including hiring consultants who attended
partisan events and wrote speeches for him. The audits will
be the focus of a legislative hearing set for Jan. 11.
Shelley, a 49-year-old attorney who served six years in the
Assembly, declined to comment for this article. But
spokeswoman Caren Daniels-Meade said he remains "fully
engaged" as secretary of state.
"In the midst of the investigations," Daniels-Meade said in
a statement, "he still managed to oversee and guide a
flawless presidential election with the highest number of
voters in the history of this state."
Shelley has few fellow Democrats defending him, unlike
Perata, who has friendships with politicians that date back
almost 30 years. The son of a former San Francisco mayor
and congressman, Shelley is known for shouting at his staff
and sometimes at legislators, a trait that has left him
with few allies in Sacramento.
"There are very few friends of Kevin Shelley on the
Democratic side of the aisle," said a veteran Democratic
consultant who works for several officeholders and
requested anonymity. "There is party loyalty. But there is
very little sympathy for the way he has handled the
In a sign of the depths of Shelley's political problems,
one fellow Democrat, Sen. Debra Bowen of Marina del Rey,
recently broke an unwritten rule by announcing her
candidacy for secretary of state, even though Shelley could
seek reelection in 2006. Bowen says Shelley is so weakened
that "the likelihood of there being a difficult battle"
with him is low.
The Perata-related investigation became public in November,
when a federal grand jury issued more than a dozen
subpoenas seeking documents related to the 59-year-old
senator, his son and daughter, some of the senior Perata's
associates and their corporate entities.
Federal authorities refuse to discuss the case. But the
investigation apparently began more than a year ago, when
the estranged companion of one of Perata's former aides,
Oakland lobbyist Lily Hu, presented the FBI with what he
claimed was evidence of kickbacks involving East Bay
politicians. The companion, Frank Wishom, has since
FBI agents searched Perata's home in Oakland last month
and, as reporters and photographers watched, agents
conducted an unusually high-profile search of the home of
Nick Perata, the senator's grown son, with whom he has a
business relationship. Agents seized records from both
Perata, who maintains a private consulting business, has
had extensive dealings with other individuals named in the
subpoenas. One is Timothy Staples, his college roommate and
former business partner.
In 2003, Perata carried legislation that would have imposed
a fee on diaper sales to create an estimated $11 million in
recycling programs in the state. The firm pushing the
recycling technology, Knowaste, had retained Staples to
Perata, a former high school teacher and the son of a
milkman, has denied wrongdoing. He declined to be
interviewed for this article, but his aides and attorneys
have said there was nothing illegal about his business with
Staples and others.
"Sen. Perata," said his spokesman Jason Kinney, "is focused
like a freight train on one thing: getting Senate Democrats
armed and ready to make progress in this legislative
session on issues that matter to Californians."
As Senate leader, Perata must play a central role in the
political and policy fights.
"People are sober and are bracing themselves for the times
ahead," said Sen. Carole Migden (D-San Francisco). But,
adding that she detected no second-guessing about the
Senate Democrats' selection of Perata as their leader,
Migden said: "We're trying to pull ourselves together as a
Perata generally is well-liked in Sacramento, though he has
his share of rivals and enemies in Oakland, where he is
compared to an old-fashioned machine-style politician. Even
some Republicans are hesitant to disparage him.
"There is smoke," said Assemblyman Ray Haynes (R-Murrieta),
among the Legislature's more outspoken partisans. "The
question is, 'Is there any fire?' "
Tony Quinn, a Republican who co-edits a nonpartisan
analysis of state campaigns, said many moderate legislators
and lobbyists are hoping Perata can survive. Unlike many
partisans, Perata has a reputation for being willing to
"He is a professional pol," Quinn said. Many legislators
"aspire to be that."
Some old Capitol hands expect that the investigations will
amount to little. They cite repeated investigations of
former Speaker Willie Brown, who left the Legislature in
1995 unscathed after three decades of service.
More recently, Republican Insurance Commissioner Chuck
Quackenbush resigned in 2000 after a legislative
investigation revealed that he allowed insurance companies
to escape major penalties stemming from mishandled
Northridge earthquake claims. But he faced no criminal
In 2002, during the Gray Davis administration, an
investigation of an administration software contract
"People are a little inured to these things," said attorney
Barry Broad, a veteran labor lobbyist.
And legislators tend to gain a sense of invulnerability
once they take office, Quinn said. People open doors for
them, treat them to meals, give them donations.
On the other hand, he noted: "There is always a feeling
that, 'There but for the grace of God go I.' "
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